[I]t is not simply watching what they do or do not buy. These days it is increasingly scrutinising the micro-level details of pay and benefit cycles in every district in America. The reason? Before 2007, this executive said, consumer spending on food and drink was fairly stable during the month in most US cities. But since 2007, spending patterns have become extremely volatile. More and more consumers appear to be living hand-to-mouth, buying goods only when their pay checks, food stamps or benefit money arrive. And this change has not simply occurred in the poorest areas: even middle-class districts are prone to these swings. Hence the need to study local pay and benefit cycles.
“We see a pronounced difference between how people are shopping today and before the recession,” the executive explained. “Consumers are living pay check by pay check, and they tend to spend accordingly. Then you have 50 million people on food stamps and that has cycles too. So for our business it has become critical to understand the cycle – when pay [and benefit] checks are arriving.” ....
[O]ne in seven Americans (about 50 million) are now thought to be living in poverty and a similar number in “food insecure” households. Meanwhile, six million are using food banks and 47 million are on food stamps. And when the Brookings Institution tried to look at this fragility issue a couple of years ago, by analysing how many households could find $2,000 in a hurry, it concluded that a quarter of families had no access to ready, rainy-day funds. “Although financial fragility is more severe among low-income households, a sizeable fraction of seemingly middle-class Americans are also at risk,” the study concluded.The Brookings research is reflected in 'Financially Fragile Households: Evidence and Implications' (Brookings Papers on Economic Activity, Spring 2011) [PDF] by Annamaria Lusardi, Daniel Schneider & Peter Tufano.
Tett comments that what is
intriguing – if not tragic – is what it reveals about our attitude towards time. During most of the past century, it has often seemed as if a hallmark of modern “progress” is that our planning horizons, as a society, have expanded. Unlike peasants or herdsmen in the pre-modern age, who lacked the ability to measure the passage of time or calculate future risks with precision, 20th-century man appeared to have so much control over the environment that it was possible – and desirable – to take a long-term view. No longer were people destined to scramble in a reactive manner; they could plan ahead, mastering time. The fact that people were no longer foraging for food each day, but were able to visit a supermarket proactively at pre-planned intervals, was a good metaphor for a much bigger social and cognitive shift.
But, as the past five years have shown us, history does not go in a straight line, or proceed homogeneously. If you were to ask wealthy Americans to visualise the future, they might well describe it as a carefully calibrated road along which they expect to travel. But if you ask poorer Americans, who are scrambling from pay check to pay check, they are more likely to perceive the future as a chaotic series of short-term cycles. Economic polarisation, in other words, creates different cognitive maps, and also creates, of course, those subtle shifts in spending patterns that the big data experts in consumer goods companies now want to track.